Harper’s free trade express picking up steam

Peter Clark is one of Canada’s leading international trade strategists. His clients, in Canada and around the world, include governments, corporations and trade associations. He is a frequent media commentator and columnist for iPolitics.ca.

The Harper-Noda launch of Canada Japan Free Trade negotiations in Tokyo gives a major boost to the Conservative Government’s trade liberalization and diversification initiatives. Canada’s Asian trade strategy is beginning to fall into place quite nicely.

The announcement of preliminary steps toward the negotiating of a free trade deal with Thailand is a bonus event – it is yet another important building block in Canada’s evolving Asian strategy.

The U.S. began bilateral negotiations with Thailand in 2004. Negotiations stopped in 2006 with Thailand’s military coup. The coup is over but negotiations have not resumed. The United States’ two-way trade with Thailand is about $30 billion compared to Canada-Thailand’s $3 billion. Thai tariffs are relatively high compared to Canada’s. The timing is advantageous to Canada and may open the way for starting similar negotiations with other Association of South East Asian (ASEAN) economies – including the Philippines, Vietnam and Indonesia.

Formally launching free trade negotiations with Japan was the grand prize, however. Japan is the third largest economy in the world and Canada’s fourth largest trading partner. The announcement had been rumoured and then anticipated and is now a reality.

A somewhat less than comprehensive but still very ambitious, more flexible approach to trade negotiations with greater attention to mutual respect and sensitivity does not mean a bad or underwhelming deal. With Japan, patience and understanding can lead to mutually beneficial long-term relationships.

The Trans Pacific Partnership (TPP) was of considerable insignificance to Canada without Japan. Now bilateral negotiations with Japan are underway. This option eliminates the stage-managing and demands for advance commitments and concessions from Washington and its TPP puppets (Australia and New Zealand) who have been keeping Canada, Japan and Mexico outside the TPP.

Canada-Japan negotiations will also send a wake-up call to Korea about its stalled FTA negotiations with Canada. Korea would be at a disadvantage opposite Japan in an important market unless negotiations with Canada are concluded.

The Canada–Japan bilateral negotiations will likely be concluded ahead of the TPP – and will benefit Canadian farmers and ranchers and other exporters and services providers seated opposite their U.S. counterparts.

How much Japan will open its agricultural markets is not clear – but not all of them are equally sensitive. No doubt agriculture will be a difficult part of the negotiations for Japan. Canada will not threaten Japan’s rice market. While negotiations about beef and pork will be contentious they will not be impossible. Japan could show good faith by opening its market wider to Canadian beef. BSE related excuses have little legitimacy.

PM Harper spoke of protecting Canadian interests – perhaps to soothe the expected objections from the auto industry and its unions. Steel is already duty free from Japan and has been since the Uruguay Round. But the signals of flexibility and understanding will be welcomed in Japan where people are anxious about radical change and perceived threats to the health care system and other institutions.

Is the Harper government getting in over its head in launching so many negotiations? Who knows what the coming budget holds. The Harper Government is not oblivious to its own priorities and programs; staff will be available. I am convinced that Canada has the resources needed to cope with these negotiations.

There have been suggestions that Japanese negotiators are better and tougher than Canadians. This is quite simply wrong. Canadian trade negotiators take a back seat to no one. Those who doubt Canada’s ability to understand and negotiate with Japan have never met Canada’s formidable Ambassador to Japan – Jonathan Fried. No one works harder than Jonathan and few can match his ability to master a file (or understand a culture) Canadians have been negotiating with Japan for many years. It is not a speedy process, but mutually unsatisfactory solutions usually emerge. (Mutually unsatisfactory is the best kind of deal.)

Clearly, the Canada-Japan FTA launch announcement is the highlight of PM Harper’s Asian tour. It is a major achievement in a trade world where Canada must play harder because of its size. The Canada-Japan FTA is doable before TPP is concluded – and as our American cousins like to say – Canada will be in the catbird seat. The news will not likely be well received in Washington.

Can Canada increase its exports to Japan by two-thirds? This is not an unreasonable goal. Expanded energy trade will certainly help. Japanese tariffs are somewhat higher than ours.

The Canadian FTA negotiating program recognizes that Canada urgently needs to diversify its global customer base and to be ahead of the curve, not always playing catch up. Canada must ensure that its existing exports are not shifted to competitors who secure preferential access to traditional markets before we do.

That Canada may be headed for earlier opening of the Japanese market will not be lost on U.S. competitors – particularly those who have been resisting Canadian access to the TPP negotiating table. Will they lobby for Washington to accelerate negotiations with Japan as they did when Canada secured free access to Colombia first?

Very likely. No one wants to play catch up. EU and U.S. business leaders are pressing to conclude a transatlantic deal – a deal which will likely resemble the Comprehensive Economic and Trade Agreement (CETA) the EU is negotiating with Canada.

Will Korea send PM Harper positive signals about resuming FTA negotiations during his visit to Seoul this week? If so our hockey loving PM would have scored an impressive hat trick. The prospect of Japan getting earlier preferential access to Canada cannot hurt the case for closure of the nearly done and very important Canada-Korea FTA.

Ideally Canada will begin FTA negotiations with China this year. It is important that China, Japan and Korea have inked a trilateral investment pact. The China-Japan-Korea FTA talks will begin soon. FTAs with all three will be very important for Canada’s participation in trade and supply chain linkages in Asia.

The continuing involvement of PM Harper, Trade Minister Ed Fast and Agriculture Minister Gerry Ritz are pivotal to Canada advancing its trade ambitious agenda. Let’s hope that this week’s budget will provide the depth of negotiating skills and support they need. I would be shocked if this did not happen.